GVK Infrastructure-Changi talks for airport business stake sale break down

Talks between GVK Infrastructure & (GVKPIL) & Singapore based - Changi Airport for stake sale in the former's airport business have broken down according to two sources familiar with the details. GVKPIL was in exclusive talks with Changi Airport to sell 26% stake in its Airport business.

The two sides had signed an exclusivity agreement to engage in discussions towards accomplishing a deal for a period of 90 days which has now lapsed. Sources say that the Changi Airport's board is now seeking more details and clarity on the projected revenues. "The deal has not been scrapped but with differences emerging over some issues it may not go through" said a source who did not want to be named.

GVKPIL has now initiated talks with financial investors to dilute stake in the airport business. Actis, 3i & Blackstone have shown interest in exploring talks with the company. GVKPIL is looking at raising Rs 2200 crore to Rs 2500 crore by divesting up to 26% stake in the airport business.

"As a routine we have been talking to many investors. As and when a deal finalizes we will announce it" GVK's spokesperson said in response to the story.

This deal was seen as an important milestone for both the companies. GVK would have got a powerful international partner to counter domestic and international rivals when the bids for the Navi Mumbai airport. GVK had secured a right of first refusal in 2005 when it won the bid to develop the current airport but it will have to match the bid by a rival for the new airport. Changi, with deep pockets was seen as the right partner.

For Changi, the GVK deal would be a gateway to airports in two of India's biggest cities, Mumbai and Bangalore.

GVK is in need of funds to bring down the massive debt. The company is also looking to dilute stake in its Hancock assets in Australia. Mumbai International Airport (MIAL) and Bangalore International Airport recorded revenue of Rs 332.49 crore of Rs 153.79 crore respectively, in Q3 FY'12.

GVK recently increased equity holding in MIAL from 37% to 50.50% and as a result, MIAL has become a subsidiary of the company. The Group also increased its equity holding in Bangalore International Airport Ltd to 43% from 29%.